Sunday, 8 January 2017

DEFECT IN PROPERTY

In recent times, dealings in real estate in Bangalore have been at the peak. Predominant reason for this is the growth of IT sector and the eagerness of the people to invest their money in real estates in and around Bangalore. As the realestates require huge investments, the purchaser has to take necessary precautions before investing his money to save himself from future complications. If the property transferred suffers from any defect in the title of the vendor, the purchaser does not get good and marketable title. Therefore, the purchaser has to make doubly sure before finalizing the deal, that the vendor has got a valid and marketable title.

Marketable Title:

The term “Marketable title” means a title which is clear and free from reasonable doubts and is a title good against everybody. Thus, it is the title which establishes full ownership of the vendor to the property intended to be conveyed, without reasonable doubt. A buyer is not bound to complete the sale if there are defects in the title to the property which are material and latent. The defect to be material, it is to be of such a nature that if the purchaser were aware of it he would not have entered into the contract of sale at all.

Doubtful or defective title:

A title is said to be doubtful when the vendor does not have any conclusive evidence to prove the ownership. The defects in title are generally latent defects which can be found only on investigation of title by perusal of documents, by an eminent advocate,carrying out searches of Government Departments and Municipal records and by making reasonable enquiries. The vendor is bound to disclose such latent defects known to him.

A title becomes doubtful:

1.Where the doubt arises by reason of some uncertainty in law itself;

2.Where the doubt pertains to the application of some settled principle or rule of law.

3.Where a matter of fact upon which a title depends is either not in its nature capable of satisfactory proof or is capable of such proof but yet not satisfactorily proved.

The ownership of the vendor to the property intended to be sold, must be the property traceable from the previous title deeds commencing from the Deed which can be considered as a good root of title and for this purpose at least 30 years previous title would need to be verified. The property should have already been properly transferred from all predecessors-in-title and no third person other than the Vendor should have any right or claim thereto.

Thus, for example, if ‘A’ has sold the property to B and if it is found that the property under sale belonged to a Hindu Joint Family property and ‘A’ has sold it neither for legal necessity nor after obtaining the consent from Co-Parceners, then the property sold to ‘B’ is said to be defective.

The following are a few instances where the title cannot be termed as defective:

-Title by adverse possession is marketable and not a defective title, if proper title by such possession can be successfully made out. A title may be good although there are no Deeds but there must have been such a long uninterrupted possession, enjoyment and dealing with the property as to form a reasonable presumption that the title is absolute .

-Loss of title deed is not a defect, if the loss can be explained satisfactorily.

Defect in property:

Defect in property is different from the defect in title. A defect in the property only prejudices the purchaser in the physical enjoyment of the property but the defect in title exposes the purchaser to adverse claims. This difference has been enunciated in Section 55 (1) (a) of the Transfer of PropertyAproperty Act, which provides that the vendor is bound to disclose to the purchaser any material defect in the property or in the vendor’s title. The defects in property are generally patent defects which can be seen on an inspection of the property and the Vendor need not disclose the same so long as the same does not lead to defect in title.

Root of title:

In investigating title and in considering whether the title is marketable and free from reasonable doubts, it is necessary to find out the root of the title. Documents are considered as root of the title. A good root of title is a document purporting to deal with the entire property conveyed, which does not depend upon the validity of any previous instrument and without inviting any suspicion on the title of the Vendor. It may also be described as a document of transfer of property showing nothing to cast any doubt on the title. An instrument, the effect of which depends on some earlier document is considered as an instrument with insufficient root of title. In India, there is no law which stipulates statutory period for examination of root or commencement of title. However, it is advisable to investigate the title for a minimum period of 30 years unless the circumstances warrant production of documents beyond 30 years.

Though our law makes it obligatory on the part of the vendors to disclose the defects in title before the sale of a property, purchasers have also to exercise due diligence and investigate the title of the property before purchasing the same, to avoid future complications.